C. M. No. 1581/2007 (delay) in I. T. A. No. 173/2008

1. This is an application for condonation of delay in filing the appeal. Apparently there is a delay of about 12 days in filing the appeal. Although the application mentions only 9 days delay. The reason given for the delay is that the CCIT had directed that the opinion of the senior standing counsel be sought. This was done by a letter dated November 16, 2007. The senior standing counsel had given the opinion on November 27, 2007, and forwarded the same on November 28, 2007, to the CCIT-III. However, the said CCIT was taken ill and, unfortunately, he passed away shortly thereafter. The file was handed to another CCIT who was able to approve the filing of the appeal only on December 4, 2007, and forwarded the file on December 5, 2007.

2. The delay in filing the appeal has occurred because of these circumstances and not because of any intentional or unavoidable delay on the part of the appellant.

After hearing the counsel for the parties, we feel that this is a case in which the delay is fully explained and ought to be condoned. The delay is condoned. This application is allowed and it stands disposed of accordingly.

I.T.A. No. 173/2008

3. The first issue that is sought to be raised in this appeal pertains to advertising expenditure of approximately Rs. 3.08 crores. According to the Assessing Officer, the expenditure were incurred for launching of its products. The Assessing Officer was of the view that such expenditure was of an enduring nature and, therefore, treated one-third as "capital expenditure" and only allowed the two-thirds of the said amount as "expenditure, to the assessee". The Commissioner of Income Tax (Appeals) allowed the entire amount after treating the expenditure as "revenue expenditure". The findings of the Commissioner of Income Tax (Appeals) were confirmed by the Income Tax Appellate Tribunal by virtue of the impugned order. Particularly, the Tribunal held that there was a direct nexus between the advertising expenditure and the business of the assessee and that the assessee had to incur such expenditure to meet the competition in the Indian market for selling its products in India. A finding was returned that unless the assessee made its products known to the market, its business would suffer. Consequently, the Tribunal held the entire expenditure on advertising to be of a revenue nature and allowed the same. The Tribunal also noted the decision of the Supreme Court in the case of Empire Jute Co. Ltd. Vs. Commissioner of Income Tax, wherein the Supreme Court held that there could be cases where the expenditure even if it was incurred for obtaining of a benefit of an enduring nature may, nevertheless, be on the revenue account and, in such cases, the test of "enduring benefit" may break down.

5. We are of the view that the decision of the Tribunal on this aspect of the matter does not call for any interference and, therefore, no substantial question of law arises on this aspect.

Proposed questions Nos. 2 (e) and (f) have already been the subject-matter of a decision of this Court in Commissioner of Income Tax Vs. Woodward Governor India Pvt. Ltd., . This Court has decided these questions against the Revenue and in favour of the assessee. So, on this issue also, no substantial questions of law arise.

6. However, we feel that the following two substantial questions of law do arise for our consideration:

1. Whether the Tribunal was correct in law in deleting the addition of Rs. 25,29,431 made by the Assessing Officer by amortizing the expenditure towards the professional fee to M/s. Eicher Consultants Services Ltd. to the extent of Rs. 31.62 lakhs paid towards the project of supply Chain Management & Human Resource Revenue-Engineering by allowing only a deduction of l/5th as expenditure in the year under assessment

2. Whether the Tribunal was correct in law in holding that unutilized amount of DEPB to the extent of Rs. 4,13,661 would be allowed as expenditure u/s 37(1) of the Income Tax Act, 1961, and could be allowed as a loss

7. We admit the appeal on the said two questions.

No other substantial question of law arises for our consideration. The paper books be filed by the appellant within three months as per the rules. Parties are at liberty to file documents provided that such documents had formed part of the record before the authorities below. The same may be done within four weeks.